FAQFAQ   SearchSearch  MemberlistMemberlistRegisterRegister  ProfileProfile   Log in[ Log in ]  Flint Talk RSSFlint Talk RSS

»Home »Open Chat »Political Talk  »Flint Journal »Political Jokes »The Bob Leonard Show  

Flint Michigan online news magazine. We have lively web forums

FlintTalk.com Forum Index > Political Talk

Topic: Don't let Board of Directors and auditors off the hook!
Goto page 1, 2  Next
  Author    Post Post new topic Reply to topic
El Supremo

When an individual decides to become amember of a nonprofit corporations Board of Directors, they are assuming a liability. Most corporations offer liability insurance, but gross negligence can lead to some serious issues. That is especially true when the nonprofit receives federal funding.

There is also the issue of liability on the part of the community accepting and dispersing the funding.

Example#1-Flint West Village

Note some similarities to the current financial situation

This organization was a 501(c)3 Public Charity that was required to file an IRS form 990 or 990 EZ. Also, because they received substantial federal funding from both the City of Flint and the State of Michigan, they were required to have an audit.

!st warning sign-Audit was very late and took over a year to complete. Auditor noted issues, some of which were related to city policies and procedures:

A. Hud requires a written cost allocation plan for indirct expenses and the agency did not have one. The agency alleged the city returned their plan and stated they did not require one. They further alleged the City of Flint received HUD funding without such a plan in place, which really throws the issue into HUD's ballpark if true.

B. The agency failed to file grant reports timely and reports frequently had to be amended. The agency had several personnel changes and four differnt individuals assumed some accounting roles.

C. The General Liability Insurance was allowed to elapse. (NOTE) The agency received federal funding to renovate the Hardy House, a historic house in Carriage Town, into offices for Carriage Town. When lightning struck the house and started a fire, the loss was not covered. Therefore the project could not be completed.

City of Flint Role?

The agency alleged that during the Stanley administration, the allocation process for HUD funding was significantly delayed. This was an audit for 2002, and the agency alleges the 2002-2003 process was not completed until October 14, 2003. The audit was not sent to the IRS until August of 2004. The dates only make sense if the auditie=r meant October 14, 2004 and approved for funding in February 2003, but retroactive to October 20003.

The agency in a direct communication stated the city delayed payments significantly to all agencies thus creating a cash low crunch. They blamed the Stanley administration for their downfall, One former nonprofit employee alleged that then Finance Director Matt Grady told nonprofits the city was paying bills out of a pooled cash fund and that because of shortfalls, they were using water fund reserves. Other agencies complained of delays, but not to the extent of this agency. Financial problems within the agency most likely contributed.


The city should have paid attention to the audit warnings. Deficits were shown of $136, 686 for year 2002 and $226,444 for year 2003.

The agency bought properties for their landbanking to keep speculators out of the area. Changes in the tax law and the creation of the Land bank meant the agency had to now pay taxes on the properties that had been amassed. The agency began losing properties and accumulated tax liabilities. A meeting in the Treasurers office raised the issue that some nonprofits inflated the value of the land holdings to make themselves appear solvent. That appeared to be the case here.

Also during this time a former DPW Director made an error by not following proper demolition procedures and HUD disallowed $1.4 million of expenditures.

Staff from DCED began working with the nonprofit in march of 2004. Only four board members were active at this time and no agreement could be reached as to how to solve the problem, in part because the board held such divergent views on how the agency should proceed.The board had laid off the Executive Director and the agency could not demonstrate a capacity to continue as a viable entity for HUD funding.

That did not stop the Emergency Financial manage Edward Kurtz from giving the agency $810,000 in HUD funding (03EFM0508). He allocated additional funding prior to his leaving on June 30, 2004. Council granted him immunity from any of his actions.

The agency concentrated on demolition and demolition is not a money making venture for a nonprofit, The agency, even when facing bankruptcy did not want to sell any of their properties. Minutes show a request for additional funding to redeem properties lost for taxes before the audit.

Believing they should be exempt from taxes, the agency hired an attorney to fight the Land bank.The Auditor is not an attorney and yet he expressed an opinion the Tax Tribunal case had "meritorious claims" in the audit. The agency lost those claims.

The board failed to mitigate lossesfor properties purchased theough HUD and MSHDA. Letters to potential land donors show possible excessive land values attached to the properties in question and maybe an IRS issue.

Bottom line is the city failed to adequately perform their oversight respnsibilities and did not place the agency on sanctions. That would have been an administrative decision and should have been based on sound policies and procedures. The CWAC also made uniformed or erroneous decisions when it came to funding. Also the Council can make changes up to 15 % of the HUD allocation without stopping the process. Under the Emergency Financial manager the staffing levels were reduced and remote monitorin was used more than agency visits. Staff was often overwhelmed with the large number of contracts.

The DCED kept being moved to new locations and documents were misplaced and lost. HUD purchased furniture was given to city staff and the city had a HUD finding over the issue.

On October 5,2004 the entire Board resigned their positions as their liability insurance lapsed. They owed the Metro Housing/Mott Foundation Partnership $175,000; Citizens Bank $49,452 and Bank One $36,001. The computers and some office equipment had been removed from the building. A loss of over 100 properties and the potential loss to the Land bank the next march, left the agency with few options to repay their debts.

The agency was placed into a forced bankruptcy, which only recently ended. The bankruptcy Court was furious that prior to their dissolution the agency sold three properties to a member of the Board of Directors and they forced Kettering to pay additional mmonies for the properties. The new fraternity now sits on the disputed property/

HUD made audit findings on the agency, which were not followed up on.
Post Sat Feb 26, 2011 7:14 am 
 View user's profile Send private message  Reply with quote  
El Supremo

Date Issued: October 13, 2010
Audit Report No.: 2011-CH-1001
File Size: 543KB

Title:The City of Flint, MI, Lacked Adequate Controls Over Its HOME Program Regarding Community Housing Development Organizations' Home-Buyer Projects, Subrecipients' Activities, and Reporting Accomplishments in HUD's System
The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the City of Flint's (City) HOME Investment Partnerships Program (Program). The audit was part of the activities in our fiscal year 2010 annual audit plan. We selected the City based upon our analysis of risk factors relating to Program grantees in Region V's jurisdiction and a citizen complaint to our office. Our objectives were to determine whether the City complied with Federal requirements in its use of Program funds for community housing development organizations' (organization) home-buyer projects and subrecipients' activities and accurately reported Program accomplishments in HUD's Integrated Disbursement and Information System (System). This is the second of three planned audit reports on the City's Program.

The City did not comply with Federal requirements in its use of Program funds for organizations' home-buyer projects. It (1) did not ensure that organizations entered into lease-purchase agreements or entered into appropriate lease-purchase agreements with households, (2) failed to ensure that an organization transferred homes to home buyers within 42 months of project completion and did not convert the home-buyer projects to rental projects, (3) did not reimburse its HOME trust fund treasury account (treasury account) for terminated projects, (4) inappropriately used Program funds for home-buyer project costs that were administrative expenses, (5) did not prevent an organization from entering into a land contract with a home buyer, (6) inappropriately used Program organization reserve funds for an owner-occupied single-family rehabilitation project, (7) used Program funds for unreasonable acquisition costs, and (Cool did not decommit and reprogram Program funds for a terminated project. As a result, the City drew down and disbursed nearly $1.7 million in Program funds for organizations' home-buyer projects that did not meet Federal requirements and inappropriately drew down and disbursed more than $143,000 in additional Program funds.

The City also did not comply with Federal requirements in its use of Program funds for subrecipients' activities. It (1) inappropriately used Program funds for costs that were not associated with an eligible project, were administrative expenses, and were unrelated to the City's Program activities; (2) lacked sufficient documentation to support Program funds used for projects; and (3) did not reprogram Program funds for a terminated project. As a result, the City inappropriately drew down and disbursed nearly $427,000 in Program funds and lacked sufficient documentation to support nearly $65,000 in Program funds.

Further, the City did not accurately report Program accomplishments in HUD's
Page 9 of audit- "Hud's reulations at 24 CFR 92.503 (b) (2) state that any Program funds invested in any project that is terminated before completion, either voluntarily or otherwise, must be repaid by a participating jurisdiction in accordance with Section 92.503 (b) (3). Section 92.503 (b) (3) states that if the Program funds were disbersed from the Participating Jurisdictions HOME trust funds local account (local account), the funds must be repaid to the participating jurisdictions local account."
Page 10- City drew down and disbursed $45, 200 in Program funds from April 2003 through April 2004 to Flint west Village for rehab and soft costs associated with 2 homes. They filed for Chapter 7 bankruptcy on 3-31-2005 and dissolved on 10-1-2006. As part of the bankruptcy, one home was sold to a private party. No projects were completed and there was no recapture of funds. City did not attempt to rehab the second house.

These projects were started under the Emergency Financial manager. These properties have only recently been released by the bankruptcy court, Even the properties taken that year as foreclosed upon by the land bank had to be returned to the court for the bankruptcy.

Flint's law department had very little understanding of HUD regulations and they should have been more proactive.

The OIG could not find the records but they were stored in the Kettering archives by former board member David White.

The non profit was so dysfunctional that Williamson refused to allow funds allocated by Kurtz to go to the agency. Council refused to reallocate so HOME funding was lost for a year.
Post Fri Mar 18, 2011 9:54 am 
 View user's profile Send private message  Reply with quote  
Ted Jankowski

Aren't these the same violations year after year? I notice this goes back to 2002.. What's going on. Every time we get a new administration they revap the entire office?? Is there NO continuity? Or what is the problem. Or are these non profit's just scams to begin with?
Post Fri Mar 18, 2011 10:53 am 
 View user's profile Send private message Send e-mail Visit poster's website AIM Address Yahoo Messenger  Reply with quote  
El Supremo

For some reason HUD allowed findings from 17 years ago to go unanswered. After Williamson threw HUD official Sykes out of his office they demanded responses. The office had to literally shut down to give responses.

Also the department was moved so many times in the last 7 years (5 times I believe) that records were lost and misplaced. Records that had findings were supposed to be marked and not discarded.

The first audit of 2 in 2009 and 2010 addressed the 17 years of findings that were not dealt with. The department was reduced to a skeletal crew. particularly when Kurtz was in charge. Melanie Pursell the budget director at that time actually sold the best furniture in city hall (some say to her friends, but i can't verify that) and much of that furniture and computer related items were paid for with HUD dollars. HUD has a policy in place for the disposal of any item purchased with HUD funding.

You have to ask why HUD allowed this to continue for so long. I remember calling HUD and had friends call HUD only to be told the White House told them to back off.

You can't overlook the role of the CWAC and City Council. The CWAC recommended agencies for funding even when they knew there were taxes owing and other issues. Council allowed friendships to force funding to go to agencies that were in trouble. Acting directors that did not know what they were doing compounded the problem and staff was ordered to do some things.
Post Fri Mar 18, 2011 2:52 pm 
 View user's profile Send private message  Reply with quote  
El Supremo

Plante Moran, as Dupois Ryden, was the auditor for both Flint West Village and Greater Eastside Community Association (GECA). Their audits were so carefully worded that you almost had to be another accountant to see both agencies were still being funded when both were in trouble. GECA had a warning that they may not be able to continue operation because of deficits and other issues.

HUD says communities should work with troubled agencies to help them succeed. With a skeletal staff, that was impossible. Also you were dealing with direcors that thought they knew more than staff. The Board of Directors had fiduciary responsibilities and both boards abdicated their responsibilities.
Post Fri Mar 18, 2011 3:08 pm 
 View user's profile Send private message  Reply with quote  
Ted Jankowski

So I guess the underlying question is alas the stupidest one. can it be fixed ad what would it take? Who is the person to fix it?
Post Fri Mar 18, 2011 7:30 pm 
 View user's profile Send private message Send e-mail Visit poster's website AIM Address Yahoo Messenger  Reply with quote  
El Supremo

Example #2

Greater Eastside Community Association or GECA

The OIG got part of this audit investigation wrong. GECA did not purchase this home on Maryland east of Franklin. They owned it and they were selling it on a land contract. They decided to repurchase the home and received an advance in money to purchase the home while never disclosing the true situation. The land contract holder was willing to sell but the deal was never consummated.

Under HUD HOME rules, GECA had one year to start renovation and 2 years to complete. If that process is delayed then they must file paperwork and a plan that includes completion.

GECA also bought 2 former rental properties on Maryland, west of Franklin and directly behind the homes GECA built on Delaware. Considering the condition of the homes, GECA may have paid too much or GECA let the homes slide into further disrepair. Although GECA had already used nearly all of the administrative money and one year had passed they had not started renovation. Karen Morris sent them notification that they were expected to start.

Both houses were condemned as they were open and being vandalized. Some metal and even windows were taken. In 2006 the city sued and the properties were turned over to the city. Great except the city did not finish them either. And the law department had such a limited understanding of HUD rules they nearlly lost the case in it's entirety.

This lack of understanding will cost the city $149,130 in general fund dollars to HUD. GECA was required to replace the money not used to purchase the first house plus $1,100 in accrued interest. The city had placed the money from GECA into the self insurance fund and not returned it to the HUD local account. The city had disbursed $81,551 to GECA.

GECA is another agency the Emergency Finacial Manager allocated funds to although they owed property taxes. The CWAC did not understand the rules and said they thought it meant taxes should not be owung for the project under consideration for funding. Flint, as a home rule city, cannot enter into a contract with one who owes the city.

Post Fri Mar 18, 2011 8:27 pm 
 View user's profile Send private message  Reply with quote  
El Supremo


ID Num: 734766


Type of Entity: Domestic Nonprofit Corporation
Resident Agent: JOSHUA FREEMAN

Registered Office Address: 2804 N FRANKLIN AVENUE FLINT MI 48506
Mailing Address: MI

Formed Under Act Number(s): 162-1982

Incorporation/Qualification Date: 5-25-1995

Jurisdiction of Origin: MICHIGAN

Number of Shares: 0

Year of Most Recent Annual Report: 08

Year of Most Recent Annual Report With Officers & Directors: 06

Status: ACTIVE Date: Present
Post Fri Mar 18, 2011 8:52 pm 
 View user's profile Send private message  Reply with quote  
El Supremo

The Board of Directors for the Land bank repeatedly made allowances for GECA , despite serious arrearages in the land contract given by the Land Bank for the GECA office.

After former Executive Director Kate Fields created Advanced Solutions and got the Energy Grant through the Department of Energy, she used this office for a time. Josh Freeman as registered agent of GECA deeded the property back to the Land Bank.

Instrument: 201002050006877 Volume Page:
Recorded: 2/5/2010 9:38:52 AM Prepared: 01/21/10 Mailed: 07/23/2010 Pages: 1
Document Type: QUIT CLAIM DEED-TREASURERS Interest: Consideration:

Legal Description: Sub: COLUMBIA HEIGHTS, Lt: 56, PrpId: 4105527004, St: 2802 FRANKLIN AVE N, , , City Code: 54 / Sub: COLUMBIA HEIGHTS, Lt: 57, PrpId: 4105527004, St: 2802 FRANKLIN AVE N, , , City Code: 54
Marginal: Bkwd I 200408270090558 (LC)
Post Fri Mar 18, 2011 9:03 pm 
 View user's profile Send private message  Reply with quote  
El Supremo

Carolyn Sims, former 5th ward council and land Bank representative voted to extend GECA's contract and once ordered DCED to give "Poor Kate Fields" some federal money. She had lobbied the land bank to change their rules so that they alone could select the City of Flint representative on their board.
Post Fri Mar 18, 2011 9:07 pm 
 View user's profile Send private message  Reply with quote  
Ted Jankowski

Sorry, but Kate Fields always seemed to me to be a pretty Smart and competent woman. And have a pretty good understanding of Grants and funding? I find it a bit difficult to swallow that she was screwing this crap up with HUD? what else ya got?
Post Sat Mar 19, 2011 1:42 am 
 View user's profile Send private message Send e-mail Visit poster's website AIM Address Yahoo Messenger  Reply with quote  
El Supremo

You have forgotten how she screwed up all of the complaints she made to HUD and councel and the campaign finance complaints that went nowhere.

Looks can be deceiving and I have hundreds of pages more.
Post Sat Mar 19, 2011 7:24 am 
 View user's profile Send private message  Reply with quote  
El Supremo

If she is do smart why is there a whistleblower lawsuit involving her company and Greg Eason. Eason was originally going to be her CEO for her energy company. What else does the corporate veil hide. So she ingratiates herself to people and hugs every council person as they enter. Friendships do not make good political decisions.

I know you read M-Live and then you should have noticed that "Old Flint Guy" took his complaint to the US attorney and stated they were investigating. Federal complaints take as long to complete as the product of elephants mating and sometimes longer.

Why else would Ananich stall the decision to give the energy grant to a company with 17 years experience so that the new council could change the grant over to her. Ananich was her President of GECA until he was elected, and then Josh Freeman took over. Ananich practically grew up knowing Kate as she was a friend of his fathers. He got nonprofit status and no taxes on the bank building on Franklin and Davison for her. He also signed as President of GECA for a $100,000 loan on the property. She still lost the property.
Post Sat Mar 19, 2011 7:37 am 
 View user's profile Send private message  Reply with quote  
El Supremo

YouTube - Kate Fields Speaks @ Flint City Council
Sep 3, 2006 ... Kate Fields Speaks @ Flint City Council ... Added to queue Habanera rehearsal, Kate Aldrich at the Detroit...by michiganopera9519 views ...
http://www.youtube.com/watch?v=nIcKrxDkolQ - 101k - Cached - Similar pages

Not only did the city not lose the money, but HUD praised Nancy Jurkiewicz-Rich. The $1.4 billion lost was because Kurts through Emergency Financial Manager directives gave the money to Greater Eastside (kate's org.) and Flint West Village although neither one qualified. Council refused to reallocate the dollars.

The audit report from October 2010 details HUD HOME dollars received since that money was lost.
Post Sat Mar 19, 2011 9:01 am 
 View user's profile Send private message  Reply with quote  
El Supremo

If you look at these examples there are 2 common threads:

1- An emergency financial manager (EFM) made the decision to fund these two agencies through executive orders. Staff attempted to make the best of a bad situation but the situation could not be resolved. Cuts to staff by the EFM further hindered their ability to resolve critical issues.

2. The board of directors of these agencies had an obligation to be aware of the issues with unpaid taxes, etc. That is why boards have liability insurance because they have a fiduciary responsibility.

You could add a warning to not throw HUD officials out of you officice and don't trust council with hidden agendas!
Post Sat Mar 19, 2011 2:12 pm 
 View user's profile Send private message  Reply with quote  
  Display posts from previous:      
Post new topic Reply to topic

Jump to:  
Goto page 1, 2  Next

Last Topic | Next Topic  >

Forum Rules:
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum


Flint Michigan online news magazine. We have lively web forums

Website Copyright 2010 Flint Talk.com
Contact Webmaster - FlintTalk.com >